HDFC AMC shares jump 6% to hit new 52-week high after Q2 results; more steam left?

Shares of HDFC Asset Management Company (HDFC AMC) surged in Friday's trade to hit a 52-week high after the company reported a strong performance in the period ended on September 30, 2023. The company announced its results on Thursday.

HDFC AMC reported a 20 per cent rise in consolidated net profit on a year-on-year (YoY) basis to Rs 436.52 crore for the September 2023 quarter. Its net profit stood at Rs 364.5 crore in the year-ago period. The company's revenue from operations increased 18 per cent YoY to Rs 643 crore in Q2FY24 from Rs 574.54 crore in Q2FY23.

HDFC AMC's average assets under management (AUM) on a quarterly basis grew more than 8 per cent to Rs 5.24 lakh crore, compared to Rs 4.85 lakh crore in the preceding June quarter. The company commands a 12.4 per cent market share in quarterly AUM of the entire mutual fund industry.

Following the results' announcement, shares of HDFC Asset Management Company surged about 6 per cent to Rs 2,910.70 on Friday, hitting its new 52-week high. The HDFC Group firm commands a total market capitalization close to Rs 62,000 crore. The scrip settled at Rs 2757.25 in the previous trading session.

Shares of HDFC AMC have gained more than 82 per cent from its 52-week low hit on March 20, 2023. The stock has rallied about 35 per cent in the year 2023 so far. The stock is up 50 per cent in the last one-year period, and up 60 per cent on a six-months basis.

For the first half year ended on September 30, 2023, the company reported a 35 per cent jump on a YoY basis in the net profit to Rs 913.93 crore. The company clocked a bottom line of Rs 678.04 crore in the same period last fiscal. Revenue increased about 15 per cent to Rs 1,217.62 crore during the period under review.

HDFC AMC’s 2QFY24 results were near perfect, with both headline/core earnings up 20 per cent YoY along with strong operating metrics such as fund performance, customer addition, SIP flows and yield expansion, said Kotak Institutional Equities. HDFC AMC’s growth drivers remain intact and it is gathering momentum, it said.

"Its strong outperformance versus the industry is further accelerated by industry tailwinds, Valuation re-rating puts greater onus on healthy earnings growth to play out over the medium term," it added while retaining an 'add' rating on the stock with a revised target price of Rs 2,900 from Rs 2,600 earlier.

HDFC AMC sustained its strong run with a top-notch showing across most operational parameters in Q2FY24- equity market share, SIP flows, unique individual accounts and performance. Despite relatively stable equity markets, the share of equity assets in quarterly average AUM rose to 57.6 per cent, implying a greater share of flows. EBIT was in line with the estimate, said Nuvama.

"We are increasing FY24E and 25E Net operating profit less adjusted taxes (NOPLAT) by 5 per cent and 11.8 per cent, respectively to build in a pickup in inflows, steady market outlook and a more benign regulatory environment. We are also raising the target price to Rs 3,170 on the back of higher earnings and lower cost of capital," it added with a buy rating.

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